Question

Bortello Corporation produces high-quality leather boots. The company has a standard cost system and has set the following standards for materials and labor: Leather (12 strips @ $20) $240 Direct labor (10 hours @ $12) $120 Total prime cost $360 During the year Bortello produced 125 boots. Actual leather purchased was 1,700 strips, at $16 per strip. There were no beginning or ending inventories of leather. Actual direct labor was 1,500 hours at $15 per hour. Compute the costs of leather and direct labor that should have been incurred for the production of 125 boots.
A. $46,500 and $37,500
B. $30,000 and $15,000
C. $36,000 and $36,000
D. $37,200 and $20,000

Answer 1

Answer:

B. $30,000 and $15,000

Explanation:

We can compute this as follows,

We need to calculate flexed budget costs for the production of 125 boots.

Budgeted / boots are as follows,

Leather cost / boot = $240

Direct Labor / boot = $120

The costs that should have been for 125 boots are then,

Leather = 125 * 240 = $30,000

Direct Labor = 125 * 120 = $15,000

Hope that helps.